About 1,100 General Motors Corp. dealers in the United States started receiving notices Friday that their franchises will be eliminated.

According to a report by the Detroit News, the moves are part of GM's plan to cut its U.S. dealership ranks by about 40 percent from 5,969 to 3,600 by next year, a deeper and quicker cut than what was included in a February 17 plan rejected by President Obama's autos task force.

The exterior view of the headquarters of General Motors (GM) is seen on this file photo taken on May 23, 2008 in Detroit, the United States. General Motors notified 1,100 of its 6,000. (Xinhua/Zeng Hu)

GM will shed about 500 additional dealerships by eliminating the Saab, Hummer and Saturn brands and another 400 to 500 dealers might be consolidated with other franchises.

GM expects 400 to 600 dealerships to terminate the franchises voluntarily based on the struggling sales environment and economy. As part of the cuts, GM will buy back inventory, signage and parts.

"We have said from the beginning that our dealers are not a problem but an asset for General Motors," Mark LaNeve, GM vice president of sales service and marketing, said in a prepared statement.

"However, it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient," he said.

GM is eliminating dealers by using criteria that include sales performance, capitalization, customer service, location, facility and staff.

GM's cuts come just a day after rival Chrysler announced it was dropping 789 of its roughly 3,200 dealerships by around June 9. Both companies have too many dealerships for too few sales and are slashing costs as they race to restructure.

GM's move to eliminate about 40 percent of its U.S. dealership network will result in 137,330 employees losing their jobs and eliminate an estimated 1.7 billion U.S. dollars in sales tax revenue for state and local governments, according to the National Automobile Dealers Association. Plus, GM will lose an estimated 35billion U.S. dollars in sales revenue.

(Xinhua News Agency May 16, 2009)